How stressed are banks in the interbank market?

Puriya Abbassi, Falko Fecht and Patrick Weber

No 40/2013, Discussion Papers from Deutsche Bundesbank

Abstract: We use a unique data set that comprises each bank's bids in the Eurosystem's main refinancing operations and its recourse to the LOLR facility (a) to derive banks' willingness-to-pay for liquidity through a one-week repo and (b) to show that a bank's willingness-to-pay is a good indicator for the probability that this bank draws on the LOLR facility. Our results suggest (i) that banks' willingness-to-pay for liquidity indeed reflects refinancing conditions in the interbank market and (ii) that the willingness-to-pay can serve as an early warning indicator for banking distress.

Keywords: banks; liquidity; LOLR facility; repos; money markets; frictions (search for similar items in EconPapers)
JEL-codes: D44 E42 E58 G21 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-eec, nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:402013

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